Singapore Centre for Applied and Policy Economics

Housing Accessibility and Affordability

Housing accessibility is simply the ratio of mandatory upfront payments to available savings. The accessibility ratio less than or equal to unity indicates that the buyer has enough funds available for upfront payments. Home buyers can easily work out their housing accessibility. At national level managing accessibility is an important policy tool in controlling the demand for housing.

Long-run affordability is the ratio of house price including transaction cost to lifetime income or financial wealth. The latter is the sum of available savings and the discounted present value of the projected future income stream. Since the average age at first marriage for Singapore males is 30 the discounted present value of income is computed over the age 30-64 so as to focus on first time home buyers. The housing affordability ratio less than or equal to 0.3 or 30% of income is usually taken to indicate an affordable house.